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Sharon Price JohnCEO
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Store counts are as of end of fiscal year 2015 (January 2, 2016),includes traditional and non-traditional stores
BUILD-A-BEAR 2016
Background: BBW
• Founded in 1997, as a specialtyretailer to “ make-your-own stuffedanimals”
• 2004 IPO
- Post IPO 22% CAGR and double-digit EBITDA thru 2007
- 2007 saw highest revenue:$474M
- 2008 was the beginning of amulti-year contraction
• Currently in ~400 locations in 15countries including:
• 330 owned and operated
• 70+ international franchisestores
• Over 3,500 employees
2013
Marked the Beginning of a
Corporate Turnaround
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Background: Struggling retail business
Eight consecutiveyears
of comp store declines
80% of doors notupdated since opening
2012 revenue down$93M from 2007 peak
22% of NA storesunprofitable in 2012
Declining Retail
Tired productdevelopment
Marketing had become“couponing”
Brand refresh overdue
Not optimizing licensedrelationships
Aged processes and
systems
Failing Strategy
Pre-2013: Multi-Year Negative Trend
BUILD-A-BEAR 2016
~ 110 bpsGross Margin decline
(2005-2012)
Cumulative Net Loss of$78M
(2009-2012)
2012 largest loss incompany’s history(Net and Adjusted Net)
2013 mid-year loss of
($6M)
Trend of Unprof itablity
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1. Return to
Profitability
BUILD-A-BEAR 2016
Objectives
2. Sustain
Profitability
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CUMULATIVE RESULTS 2013-2015:
*Adjusted Net Income/Loss excludes mngmt transition and store closing costs, asset & store impairment, goodwillimpairment & deferred tax asset valuation allowance; 2015 results are preliminary and may change; $17.25M is the
CUMULATIVE RESULTS 2012-2015:
Revenue $381M $379M $392M $378M(on a similar topline)
Total
Stores # 351 323 324 334(with 5% fewer stores &
11% less square footage)
~720bps(based on adjusted net income as a percent of revenue)
BBWProfit
Improvement
BUILD-A-BEAR 2016
($10M)
~$17M
2012* 2013* 2014* 2015*
Adjusted Net Income (Loss)*
53 wks Prelim
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CUMULATIVE RESULTS 2013-2015:
BUILD-A-BEAR 2016
CUMULATIVE RESULTS 2012-2015:
BBW 2015Retail Gross Margin
47%*
(highest since 2006)
*Retail Gross Margin % reflects the mid-point of expected range**
(820 bps pointimprovement versus 2012)
2015NA dollars
per transaction**
$44.10HIGHEST EVER
2015NA units
per transaction**
HIGHESTsince 2008
3.95
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CUMULATIVE RESULTS 2013-2015:
BUILD-A-BEAR 2016
CUMULATIVE RESULTS 2012-2015:
19.6%
2015North American
4-wall contribution*
(only 3 unprofitable NAstore versus 61 in 2012)
*2015 results are preliminary and may change
980bpsimprovement
since 2012
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CUMULATIVE RESULTS 2013-2015:
BUILD-A-BEAR 2016
CUMULATIVE RESULTS 2012-2015:
ThreeConsecutive
Years ofImprovement
• ImprovedProfitability
• PositiveConsolidatedSame Store Sales
• Margin Expansion
• Increases in
AverageTransaction Value
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BUILD-A-BEAR 2016
All While Fundamentally Changing the Company
• Re-orged with new leadershipteam including:CFO, COO, CMO, CPO
• Evolved 50% of the Board
• Updated circa pre-2008 IT, Digitaland POS infrastructure
• Instituted more efficient, data-driven processes
• Launched new brand look
• Elevated and expanded powerfulpartner relationships
FORTUNE
“ 100 Best Companies to Work For”
7th consecutive year
Developed New Strategy
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1. Return to
Profitability
BUILD-A-BEAR 2016
Objectives
2. Sustain
Profitability
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MAINTAIN THE BRAND
FIX THE RETAIL BUSINESS
BUILD-A-BEAR 2016
Strategy?
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1. Return to
Profitability
BUILD-A-BEAR 2016
Objectives
2. Sustain
Profitability
3. Drive ProfitableGrowth
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MONETIZE THE BRAND
DIVERSIFY
THE BUSINESS MODEL
BUILD-A-BEAR 2016
Strategy
Profitably Extend Build-A-Bear across multipleRevenue Streams to access business via new
Locations, Categories & Consumers
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• Global• Multi-generational• Emotional• Trusted
• Extendable• Updated
BUILD-A-BEAR 2016
Our most valuable asset
BRAND“ to maximize our potential,
we must pivot from a retailerthat built a powerful brandto a BRAND company that’s
more than a retailer”
Build-A-Bear is a
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BUILD-A-BEAR 2016
12%22%
Strong Brand:Balanced Appeal and Seasonality*
* Source: Build-A-Bear Workshop Internal Data** 3 years rolling data
Consumer Age Distribution Revenue by Quarter**Consumer Gender Distribution
12%
22%
25%
15%
26%
0-2 3-5 6-8 9-12 Teen +
23%
21%
25%
31%
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
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BUILD-A-BEAR 2016
Strong Brand:
Build-A-Bear
Aided Brand Awareness
High Awareness and Appeal
Since new branding launch,
appeal ratings have increased2007 Rating – 85%2015 Rating – 87%
Source (Awareness): C&R Research, Fall 2012, US Market Report
Source (Consumer Appeal): E-Poll Market Research
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BUILD-A-BEAR 2016
Strong Brand:
Build-A-Bear Workshop’s ADVOCACY
number is equal to or higher than
other retail brands including
American Girl, LEGO, Toys “ R” Us
and Disney
“ Advocacy” is based on a variety ofmeasures including awareness, trust,
quality, uniqueness andlikelihood to recommend
Build-A-Bear
BRAND ADVOCACY
Similar to larger Brands
Source: Burke Research 2013
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BBW experiential retail process is*:- Unique (lacks direct competition)- Engaging- Understood in many cultures
BBW high touch service model is*:- “Special”- Personalized- Memorable
BUILD-A-BEAR 2016
Strong Concept
Aligned with Millennial values- Value “experiences” over “things”- Want to “ make memories with kids”- Value brands that “ give back”
Aligned with macro-trends:
- Do-it-yourself - Crafting- Personalization/Customization- Rise in the power of entertainment &
sports brands
*Source: Envirosell, a leading consumer behavior research andconsulting firm, in 2011
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MONETIZE THE BRAND
BUILD-A-BEAR 2016
Strategy
OverhaulGlobal Owned &
Operated Retail+ EnterpriseSelling
Operations
ImplementWholesale and
CorporateSales Systems& Processes
Build Scalable
InternationalFranchisingModel/Systems
Develop NewOutbound
BrandLicensing &EntertainmentCapabilities
DIVERSIFY THE BUSINESS MODEL
Profitably Extend Build-A-Bear across multipleRevenue Streams to access business via new
Locations, Categories & Consumers
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MONETIZE THE BRAND
BUILD-A-BEAR 2016
Strategy
Strategic Investment
DIVERSIFY THE BUSINESS MODEL
Profitably Extend Build-A-Bear across multipleRevenue Streams to access business via new
Locations, Categories & Consumers
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BUILD-A-BEAR 2016
Strategy
Global Owned& Operated
Retail +Enterprise
Selling
Wholesale& Corporate
InternationalFranchising
OutboundBrand
Licensing &Entertainment
DIVERSIFY THE BUSINESS MODEL
Diversify and Add Locations
MONETIZE THE BRAND
Diversify and Add Categories
Diversify and Add Consumers
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BUILD-A-BEAR 2016
Strategy
Wholesale
and CorporateSales
InternationalFranchising
OutboundBrand
Licensing &Entertainment
DIVERSIFY THE BUSINESS MODEL
MORE PLACES
MORE PEOPLE
MORE PRODUCT
MONETIZE THE BRAND
Global Owned& Operated
Retail +Enterprise
Selling
1 2 34
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BUILD-A-BEAR 2016
EXPANSION: 2016 and Beyond
MORE PLACESBeyond updating the look, weresearched and created the new
store design with an objective to:• optimize spatial planning• improve productivity
“ Discovery Store” is a HIT!The 11 new & remodeled locationsopened in the US and the UK in 2015are over-indexing on key metrics:
• Double-Digit comp vs norm• Increased Traffic• Higher Dollars per transaction• Higher Units per transaction
“ Discovery Store”
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BUILD-A-BEAR 2016
MORE PLACES
Discovery Store
We expect to have45-55 new and/or remodeled
Discovery Storesby the end of 2016
including 4 flagshipsin multiple countries
EXPANSION: 2016 and Beyond
“ Secret Weapon” – the STUFFER- Lease line “theater”- Front/center position opens up
merchandising wall space- Faster fill rate and extra nozzle
has increased our peakcapacity by 60%
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EXPANSION: 2016 and Beyond
MORE PLACES
EXPANSION: 2016 and Beyond
• A Discovery Store flagship inCopenhagen, Demark at TivoliGardens (remodel)
New Franchise Stores
• Additional International Openingsexpected in 2016 include 20-25New Franchise Stores
A Special Project in Shanghaiwill be announced in the
coming weeks
(Expected to open mid 2016)
金泰迪工作室
• New Discovery Store flagship inShanghai, China
BUILD-A-BEAR 2016
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MORE PLACESNon-Traditional
EXPANSION: 2016 and Beyond
OUTLETS- First value-based format
- Successful openings in UK and US- Improves product life-cycle management- Leveraging “Tourist Locations” where
BBW over-indexes on key metrics
ENTERPRISE SELLING- Starting in 1st half 2016- In-store, On-line, Mobile visibility
Opened 6 BBW Outlets in 2015Expect to open 5 more in 2016
BUILD-A-BEAR 2016
EXPERIENTIAL “ Wholesale”
- Re-building Rainforest Café and T-RexCafé relationship with Landry’s- New Carnival Cruise lines relationship- BBW expected to be “on-board” in 2016
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BUILD-A-BEAR 2016
EXPANSION: 2016 and Beyond
MORE PRODUCTDrove additional Wholesalebusiness with:
• COSTCO holiday gift set palletprogram was successful, plans toexpand in 2016
75% of our best guest surveyedare interested in Build-A-Bear
branded consumer products*
Secured 10 out-bound brandedlicensed agreements in a widevariety of consumer categories,mostly launching in 2016
including:
• Spin Master toys• Frankford novelty candies
* Source: Build-A-Bear Workshop Internal Dat
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BUILD-A-BEAR 2016
EXPANSION: 2016 and Beyond
MORE PRODUCTThe “classic” product offeringgenerates our highest unitvolume of any segment atfavorable margins and is:
• Critical for our coreconsumer base and partybusiness
• Now updated more
frequently to maintain in-store freshness for ourbest guests
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BUILD-A-BEAR 2016
EXPANSION: 2016 and Beyond
MORE PRODUCT
Since 4Q 2014, we have beenintroducing Intellectual Propertiesthat include back stories, apps,music, videos and games to drive“Play beyond the Plush” with:
- Honey Girls
- Merry Mission- Promise Pets
Contributed to almost $60M inlifetime revenue and ~10M total
digital interfaces
Merry Mission’s Glisten reindeerwas our #1 item for Q4 2015
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BUILD-A-BEAR 2016
EXPANSION: 2016 and Beyond
MORE PEOPLEOur Traditional Licensing
approach drivesCore Consumer sales
Plus, we have improved ability to “ chase”hot properties
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BUILD-A-BEAR 2016
EXPANSION: 2016 and Beyond
Affinity
Collectibles
Entertainment
Sports
Fashion
Gifts
Fresh Licensing strategy is attracting new ConsumersMORE PEOPLE
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BUILD-A-BEAR 2016
EXPANSION: 2016 and Beyond
MORE PEOPLE
MinionsStar WarsPikachuToothless
The Collectible, Gifting and Teen+Consumer is generally less price
sensitive, more likely to shop on-line and over-indexes with keylicenses like:
The #1 item sold on-line in 2015?Our new GIFT BOX
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BUILD-A-BEAR 2016
2016: Projected Revenue
2016Quarter
1st 2nd 3rd 4th Full Year
ExpectedComp
Driven by:• Organic comp growth in existing stores• Accelerated comp in remodeled stores
• Volume from ~10 new permanent stores* net of closures• Double-digit growth in Digital (Mobile + Ecomm)• Enterprise Selling opportunity• Benefit from continued strategy of dr iving IP and Licensing via
a consumer segmentation strategy coupled with elevatedproduct/marketing integration
Projected 2016 Comparable Store Performance by Quarter Consolidated Comp Store Growth Expected to be low to mid-single digits
Total Revenue Growth in Mid-Single Digits
*Permanent stores are defined as traditional and outlet locations anddo not include:Seasonal, Shop in shop or pop-up locations
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BUILD-A-BEAR 2016
2016: Projected Profit
Store counts do not include Carnival Cruise ships, Landry’s orinternational franchise locations
Planning Continued Profit Growth
• 2015 Pre-tax income projectedin the range of $16.5M-$18M
• 2016 Pre-tax income expectedto increase by 15%-25%
BUILD-A-BEAR 2016
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75%
25%
Goal is to assure flexibility in capital spending to maintain our
solid cash flow, strong balance sheet and lack of debt
2016: Intended use of Capital
$25-$30M
Capital Plan
• Estimated 18-24 month payback on new and remodeled stores• Expected 4-wall contribution of over 20% for new and remodeled stores• Remodels REQUIRE store downtime and will impact total revenue• Store openings & remodels require both “capital” & “expense” investment• Remodel downtimes are generally planned for lowest revenue quarters
• Puts and takes will disrupt average store sales & sales/sq ft data comparisons
BUILD-A-BEAR 2016
New StoresRemodels
Update Store Systems
IT/Systems Upgrades“Play beyond the Plush”/IP
ImprovedRetailOperations
Infrastructure &Platforms for newrevenue streams
2016 I d d f C i l
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BUILD-A-BEAR 2016
2016: Intended use of Capital
Store counts do not include Carnival Cruise ships, Landry’s orinternational franchise locations
Share Repurchase Plan
• In fiscal 2015, the company spent $25.9M onshare repurchases• $9M remains under the current share
repurchase plan• The company intends to continue to
opportunistically assess additional sharerepurchase plans
BUILD-A-BEAR 2016
2016: Investments support Strategy
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BUILD-A-BEAR 2016
2016: Investments support Strategy
OverhaulGlobal Owned
& Operated
Retail +Enterprise
SellingOperations
ImplementWholesale and
Corporatesales Systems& Processes
Build ScalableInternational
FranchisingModel/Systems
Develop NewOutbound
Brand
Licensing &Entertainment
Capabilities
Diversify the Business Model
1 2 3 4
• POS Complianceand Enterpriseselling upgrades
• TXT Planningenhancements
• PLM upgrades• New stores/remodels
and tech upgrades• Traffic Counters
• “Play beyond thePlush” apps,music, video anddigital
development• (Licensingcurrently out-sourced)
< Capital Tracking System ----- Warehouse System upgrade ----- Talent >
• Global OrderingCapability
• Reporting andcompliance
processes &systems
• Wholesaleprocessingsystems
• UPC capability
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Thank you
Build-A-Bear
1954 Innerbelt Business Center Dr.
St. Louis, MO 63114
www.buildabear.com